Base rate at record low for 5 years

Published 26/03/2014

March 2014 marks the 5th anniversary since the Bank of England cut UK interest rates to a record low of 0.5%. Rates haven’t changed since and during that period, around a million first time buyers have embarked upon their home-owning journey. And whilst they will have been assessed by their lenders to ensure their mortgage will be affordable for them, none of them have yet experienced a rise in interest rates as a homeowner. Many will have opted for a fixed rate mortgage initially and some will still be fixed in to the same deal – others may have since remortgaged or moved on to their lender’s Standard Variable Rate. But for many, their lack of experience about what happens when rates rise could cause problems in the future.

There's no room for complacency

While the last five years has given a lot of borrowers the opportunity to enjoy low mortgage repayments, it’s important that homeowners don’t become complacent and at least make a plan for when interest rates start to rise. A mortgage is the biggest financial commitment for a lot of people and being able to afford it, both now and in the future, is essential – just remember the warning that appears in mortgage adverts, “your home may be repossessed if you do not keep up repayments on your mortgage".

If you’re concerned about the impact of a rate rise on your finances, a good place to start is to see what impact a change would have on your monthly mortgage payments – our handy interest rate calculator can help crunch the numbers. If you’re currently on a variable rate mortgage, then you could consider opting for one of the attractive fixed rates currently available to lock into guaranteed low monthly payments. And whilst rates are so low, it is a good time to make regular overpayments to your mortgage if you can afford to do so. Overpayments help to reduce your mortgage debt faster which means you save interest in the long run – our mortgage overpayment calculator can show you how much you could save.

First time buyer numbers growing

The number of first time buyers entering the market is continuing to grow, with the National Association of Estate Agents reporting that 29% of homes sold in February by member agents were to first time buyers. The latest official figures on the Government's Help to Buy scheme show that more than 17,000 homes have been bought under the scheme, with 80% of them being bought by first time buyers.

Now that the Government recently announced that it will extend the equity loan part of the Help to Buy scheme until 2020, the trend is likely to continue as more would be home owners see buying a property as a viable alternative to renting.

Still, getting a mortgage to buy a property for the first time is just the start of the journey. It may sound a bit depressing but if you’re a new homeowner, your mortgage is likely to be with you for many years to come – it should be reviewed regularly to ensure that it is always manageable and affordable and doesn’t start giving you sleepless nights.

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

We're here to offer our customers excellent fee free mortgage advice. Our expert advisers will help you secure the best mortgage deal whether you're a first time buyer, remortgaging your home, buying to let or moving up the property ladder. We'll help you throughout the mortgage process – no hidden costs or surprises, just straightforward, honest, mortgage advice.

Representative example A mortgage of £190,596 payable over 22 years, initially on a fixed rate until 30/04/23 at 1.65% and then on a variable rate of 4.90% for the remaining 17 years would require 63 payments of £860.92 and 201 payments of £1102.66. The total amount payable would be £277,868 made up of the loan amount plus interest (£85,277) and fees (£1,995). The overall cost for comparison is 3.6% APRC representative.

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